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Good innovation model at Coke

In a September 22 HBR Ideacast (Harvard Business Review’s podcast), Coca-Cola CEO, Muhtar Kent, says this as a side note about innovation at Coke:

…for us, innovation is not only inside the four walls of the company. We have incubation projects [in] many parts of the world, because we think that the Coca-Cola company and system is too big to have embryonic ides flourish.

So, we have outside [projects], in parts of the world, innovation/incubation projects.

I’ve seen my share of embryonic ideas die. Some even showed promise. With some adaptive business folks in charge, they may have grown into something.

But, inside a big company, there are many reasons to say no. Arnold Kling and Nick Schulz wrote about this in their book, From Poverty to Prosperity, which I wrote about here:

Corporate decisions are made by committees. In a typical committee, no individual has the power to say “yes” to a new project. On the other hand, almost every member of a committee has the power to veto a new project.

Observers of organizational behavior have noted that in committees one is more likely to be regarded as intelligent and a good team player by one’s peers by arguing against a new idea than by arguing in favor of it. Middle managers who fight for new ideas are regarded as troublemakers, even if they succeed in convincing corporations to undertake the projects they propose.

I’ve seen this in action. For example, I’ve seen projects killed that threatened a powerful leader’s turf (of course, that’s not the reason they made passionate pleas against the project). Or because the project was a pet idea of previous leadership. Or, the project didn’t fit into some arbitrary slogan the leader had for running the company (e.g. “We’re in the widget business, not the gidget business”). I’ve also seen these shutdown just due to impatience.

Because of this, I recommend that companies do just as Coke does, separate innovation from the bureaucratic organization. In reality, it’s hard to put any new project out of the reach of meddling bureaucrats.

Ultimately, it takes the realization by leadership that few of these projects will succeed, that none will add significantly to next quarter’s earnings (think more like 5 to 10 years) and, most importantly, leadership needs to protect these external projects from the meddling bureaucrats.

3 thoughts on “Good innovation model at Coke”

Not convinced by this discussion. Seems like things are a lot more uncertain than you state. You certainly wouldn’t argue that Steve Jobs let committees over-ride his vision for new products, would you? Seems to me that at least sometimes the essential ingredient for introducing a new product is the backing of a fanatic (half genius, half crazy), a promoter with an enormous ego and an unrealistic assessment of his chance of success. I will grant you that people with those characteristics often don’t last long in a corporation. But when they do, the corporation may grow tremendously–or go bust! And it’s very difficult to predict which will happen. Hence the uncertainty.

Hi Mark – I’m not suggesting that Coke’s is the only good innovation model. Having Steve Jobs lead your company is a good innovation model too, no doubt. Unfortunately, there aren’t many Steve Jobs around.

I’m not suggesting that Jobs let committees override his vision. I only gave that as an example of a way embryonic ideas are aborted in bureaucratic companies.

Not all big companies are led by talented innovators like Jobs. And not all innovation is driven by half genius/half crazy people. Lots of innovation is discovered by accident. In companies that don’t have a Jobs at the helm and are bureaucratic, I think successful innovations are more likely to reach maturity outside those organizations.

Even Jobs harnessed this model of innovation. After all, he didn’t create the music, games, podcasts or apps that make his products useful. All of those things are created outside the Jobs hierarchy.